Question

Stan Marsh is planning to set up a college fund for his daughter who will be heading to college 16 years from now. At that time in the future, Stan estimates that a college degree is expected to cost $ 170,630. Stan's bankinitially offered a 7.75 % interest rate annually, based on which Stan set aside some amount and readied himself to deposit into the fund. On the day of the deposit however, the bank insisted that they can only offer interest at 6.47% annually. How much more does Stan need to raise on the deposit day to still be able to financially secure his daughter's education?

Answer #1

FV = Amount required = $170,630

r1 = interest rate = 7.75%

r2 = interest rate = 6.47%

n = 16 years

Amount required to deposit at 7.75% = FV / (1+r)^n

= $170,630 / (1+7.75%)^16

= $170,630 / 3.30123516

= $51,686.7147

Amount required to deposit at 6.47% = FV / (1+r)^n

= $170,630 / (1+6.47%)^16

= $170,630 / 2.72669188

= $62,577.661

Additional amount required on deposit day = Amount required to deposit at 6.47% - Amount required to deposit at 7.75%

= $62,577.661 - $51,686.7147

= $10,710.9463

Therefore, additional amount required on deposit day is $10,710.95

A father is now planning a savings program to put his daughter
through college. She is 13, she plans to enroll at the university
in 5 years, and she should graduate in 4 years. Currently, the
annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 6% annually. The college requires that this
amount be paid at the start of the year. She now has $10,000 in...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 6% annually. The college requires total
payment at the start of the year. She now has $10,000 in a college
savings account...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $16,000, but these costs are
expected to increase by 5% annually. The college requires total
payment at the start of the year. She now has $9,000 in a college
savings account...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $12,000, but these costs are
expected to increase by 7% annually. The college requires total
payment at the start of the year. She now has $9,500 in a college
savings account...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $16,000, but these costs are
expected to increase by 7% annually. The college requires total
payment at the start of the year. She now has $8,000 in a college
savings account...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 5% annually. The college requires total
payment at the start of the year. She now has $10,000 in a college
savings account...

eBook
A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $19,000, but these costs are
expected to increase by 6% annually. The college requires total
payment at the start of the year. She now has $7,000 in a college
savings...

33. A father is now planning a savings program to put his
daughter through college. She is 13, plans to enroll at the
university in 5 years, and she should graduate 4 years later.
Currently, the annual cost (for everything - food, clothing,
tuition, books, transportation, and so forth) is $13,000, but these
costs are expected to increase by 6% annually. The college requires
total payment at the start of the year. She now has $10,000 in a
college savings...

Lauren is the proud mother of a new baby girl and plans to send
her daughter to college 19 years from now. Lauren wants to make a
deposit each summer in a special account at her bank which pays 10%
(compounded annually) so that she will have enough money set aside
that she can withdraw $20,000 at the beginning of each year to pay
tuition, room and board, etc., for each year of her four-year
education. How much will Lauren...

3. Nancy just had a new baby boy and plans to send him to
college 18 years from now. She wants to deposit each winter in an
education account which pays 11% (compounded annually) so that her
boy will have enough money set aside that he can take out $20,000
at the beginning of each year to pay tuition, room and board, etc.,
for each of his five-year integrated master degree in finance. How
much will Nancy need to deposit...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 21 minutes ago

asked 41 minutes ago

asked 43 minutes ago

asked 48 minutes ago

asked 59 minutes ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago